Concordia University John Molson School of Business Annual Report Project W2011 Professor Mark Sellors ACCO 310

Section CC

Objective To provide students with an opportunity to apply knowledge and develop analytical, research and written communication skills. The project is designed as a group project to afford an opportunity for teamwork.

The Project You have recently joined an investment advisory firm as a financial analyst. One of the firms clients, a wealthy private investor, wishes to add agriculture-related exposure to her stock portfolio. Upon consulting the clients account-opening form, you note that, with respect to equity investments, she has a risk tolerance level of medium, a growth investment objective (increase in stock price), no income (dividends) requirement, and an investment time horizon of 4-5 years. You have conducted an initial screening process and have narrowed the search down to the following shortlist of potential investments: Potash Corporation of Saskatchewan Inc. (PotashCorp) Agrium Inc.

The term project requires you to perform a financial analysis evaluation of the abovementioned companies and to make a reasoned investment recommendation. (Your analysis may lead you to recommend both companies, one of the companies, or neither company.) Students are encouraged to incorporate as much of the course material as possible in their reports.

Project teams Students will be assigned to a group to work on this project and submit one report for the group. The project must be completed in teams to facilitate the exchange of different opinions among team members.

Format, Length and Content of the Report The project should be submitted in written form in a paper of 13 (minimum) to 15 (maximum) pages in length (13 point type, 1.5 line spacing, 1 inch margin on all four sides). Your report should include all of the Required Report Elements specified below.

Project due date One copy of your report must be submitted at the beginning of class on Tuesday, March 29. No due-date extensions will be granted. This copy will not be returned to you but will be available for your review once it has been graded. Keep an original copy of your report for your files. No electronic submissions will be accepted.

Sources of information Obtain the annual reports of the companies and search the corporate websites. Also use news items from business periodicals and other library and internet reference sources in performing your analysis. In addition you may wish to consult the following investor services:

www.bigcharts.com www.bloomberg.com www.fpinfomart.ca www.hoovers.com http://moneycentral.msn.com/investor www.investor.reuters.com www.mergentonline.com (Members only - ask for a free trial subscription)

Required Report Elements

Your report should include all of the following sections and content:

1. Introduction:

Introduce your report by explaining its purpose.

2. The companies: Provide a brief description of each companys primary business activities. This description should include a brief historical summary.

3.

The industry: Carry out an industry analysis including an assessment of the industrys attractiveness from an investment point of view: Threats, opportunities, and prospects for the future.

4. Stock performance:

PotashCorp (Stock market symbol: POT) (Reports in US dollars) Agrium Inc. (Stock market symbol: AGU) (Reports in US dollars)

Compare the stock market performance of the two companies with the S&P/TSX Composite stock market index over a five-year period using a trend analysis of growth in the stock prices and the index. Which company shows a better trend?

5. Ratio analysis: For the most recent fiscal year analyze each companys financial statements using financial ratios (Liquidity, activity, profitability, and coverage ratios). Compare the ratios for the two companies. How does this analysis influence your investment decision? Use only those ratios that are relevant to the companys business. Focus on ratios that will help you make an investment decision. You do not have to analyze every ratio mentioned in the accounting textbook.

6. Trend analysis: Compare the growth in Net Income and Operating Cashflow for the two companies over a five-year period using trend analysis. Which measure, net income or operating cashflow, appears to have more influence on the price of the companys stock. Which company shows a better trend? Consult the information posted on the class website in the Term Project folder regarding the preparation and use of trend analysis.

7. Common size analysis: Use common size (vertical) analysis to examine how the relative size of each companys Cost of Goods Sold and Gross Margin has changed over the last five years, and comment on why these changes have occurred. How does this analysis influence your investment decision? Consult the information posted on the class website in the Term Project folder regarding the preparation and use of common size analysis.

8. Non-GAAP financial measures: Discuss the non-GAAP financial measures used by each company and explain why the companies include these measures.

9. Conclusion: Conclude by stating your recommendation and the reasons for such recommendation: It should tie in the conclusions reached from the analysis carried out in the individual report sections mentioned above.

10. Table of contents at the front; Appendices at the back: The appendices should include: the financial statements from the companys annual report. DO NOT INCLUDE THE COMPLETE ANNUAL REPORT; any graphs, tables or other numerical information used in your analysis; a bibliography of reference sources used.